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Ten Concerns about Your Dental Office Lease

Every dental office lease is different, and there will always be more than ten concerns with any dental office lease. Below, however, are ten of the most common issues we see, regardless of location, specialty, or circumstance.

Preguntas?

Relationships

Often we hear clients state they are not worried about the lease, or certain provisions of the lease, because they have a great relationship with the landlord or owner. That information should be considered. It is more helpful, however, to consider the possibility (or even likelihood) that the property will be sold during your tenancy. Less likely, but perhaps even more importantly, there's always the chance the landlord could go bankrupt. So, leases should not only be negotiated in terms of who the landlord is, but who the landlord may end up being.

Exclusivity

In many scenarios, this is not a concern. As more and more dentists migrate to retail spaces, however, ensuring you are the only dentist in the shopping center is key. It is usually helpful to carve out exceptions so that you can facilitate strategic alliances--like an orthodontist permitting a pediatric dentist to move in, despite the exclusivity. Be aware, also, of the surrounding properties; sometimes it is little comfort to have exclusivity in the small shopping center, when another shopping center owned by a different entity leases space to a competitor less than 100 feet away.

Relocation

Relocation, in and of itself, is not necessarily a bad thing. Concerns we have seen have been 1) business interruption (landlords will rarely pay for this), and 2) landlords covering the total costs involved in relocating. Most dentists fail to understand the enormous time and resources it takes to move even a space or two away.

Death or Disability

Most landlords are not inclined to permit the tenant to walk away from the lease before the end of the lease term--at least not without severe penalties. A single-dentist office is different, however, and attempts to carve out an exception in the event of death or permanent disability is usually a worthwhile effort. The reasons for this involve state law under the Dental Practices Act, and a detailed explanation is outside the scope of this writing, but suffice it to say that granting your estate a little breathing room in the event of a catastrophe can sometimes mean hundreds of thousands of dollars worth of difference.

Assignment

Rarely will a landlord concede the right to approve an assignment. It's important to create some latitude, however, in the event you decide to take on a partner, restructure your company, or want to sell your practice.

Common Area Maintenance Expenses

This subject deserves lengthy attention, which is typically better suited for real estate brokers versed in dental transactions. Nevertheless, it is a subject that needs attention, specifically regarding what is included, and how much it can be increased each year.

Guaranty

Most landlords will require a new dentist to personally guarantee the lease space. This is not only to guarantee the lease payments, but also to reimburse the amortized tenant improvements that the landlord gave at the start of the lease. It's advisable to "burn off" this personal guaranty as soon as possible, leaving only the dentist's corporate entity as the signatory to the lease.

Casaulty

Most landlords seek ways to minimize their liability, often through creative legalese. Careful attention should be paid to how much liability is being waived, in what circumstances it is being waived, and what can be done in the event the landlord causes any damage.

Alterations

Some tenants will seek to remake their offices, install new equipment, or expand their space. A good lease will grant the dentist as much control over their office as possible, so long as the alterations are done in a professional manner. Furthermore, attention should be paid to what becomes of the alterations once the dentist installs them. For instance, perhaps the dentist purchases and installs specialty dental cabinetry. Typically these cabinets will be considered part of the lease space (i.e. - the landlord's property) unless you have planned for this in negotiations.

Surrender

One final issue that needs to be addressed at the outset is what happens at the conclusion of the lease. Ultimately, the dentist should be able to take what is the dentist's, and leave what is not wanted. Generally speaking, however, this is not how standard leases work. For instance, it is often required that improvements be removed. If the landlord considers the dentist's plumbing as "improvements," then that is a costly removal. It's important to plan ahead and ensure that when the time comes to walk away, the dentist walks away with the wanted improvements, and not unwanted expenditures.